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Brunnermeier, Markus K.
|Issue Date:||2008 |
|Series/Report no.:||Staff Report, Federal Reserve Bank of New York 348|
|Abstract:||We propose a measure for systemic risk: CoVaR, the value at risk (VaR) of financial institutions conditional on other institutions being in distress. We define an institution's (marginal) contribution to systemic risk as the difference between CoVaR and the financial system's VaR. From our estimates of CoVaR for characteristic-sorted portfolios of publicly traded financial institutions, we quantify the extent to which characteristics such as leverage, size, and maturity mismatch predict systemic risk contribution. We argue for macro-prudential regulation based on the degree to which such characteristics forecast systemic risk contribution.|
|Subjects:||Value at risk|
adverse feedback loop
|Document Type:||Working Paper|
|Appears in Collections:||Staff Reports, Federal Reserve Bank of New York|
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